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Why We Invested in Parametrix: Insurance for Digital Catastrophes

Jonathan Saacks

October 18, 2020

Today, 83% of enterprise workloads are based on cloud technology. This has only been accelerated by the COVID-19 pandemic which spurred companies’ digital transformations and an acknowledgment of the dependence every industry has on third party systems in the cloud.

But what happens when cloud technology fails us, when AWS, Gmail, Shopify, and Zoom go down and take us down with them?

We found our answer in Parametrix, the first company in the market to address the threat of digital catastrophes and provide a solution to a growing hazard that can cost companies hundreds of millions in direct losses and reputational damage.

As a seed-stage VC backing companies at the junction of Big Data, AI, and connectivity, the Parametrix team, vision, and product spoke to our mantra at F2 — investing in startups that we believe can grow to be billion-dollar companies.

A Gaping Hole in the Insurance Market

Every industry leader looks to protect their business from financial loss, but there is a blind spot when it comes to losses triggered by IT downtime.

Despite the damage that occurs when tech fails us, the downtime insurance market is in its infancy. Yet, to fully grasp the industry’s potential, all one needs to do is look at the estimated loss businesses face every year thanks to IT downtime: a whopping $700B. This includes revenue loss, recovery expenses, SLA liability, reputational damages, and more.

This year alone, we have seen multiple service outages and the damage they have caused businesses. In the last three weeks alone we have seen Slack down, Microsoft down twice, and Google down…you can imagine these outages did more than a fair amount of destruction.

We can also look at the cyber insurance market size as a point of comparison to the downtime market, as both cover intangible assets. The global cyber market was estimated at $4.85B in 2018 and is expected to reach $28.60B by 2026, registering a CAGR of 24.9% from 2019 to 2026.

Considering the growing emergence of third-party providers’ insurance products, it’s safe to assume that SaaS downtime insurance will grow to be far larger than the cyber insurance market. Parametrix has the first-mover advantage in an industry that is on the precipice of significant growth.

Leveraging its Data and AI Capabilities

Parametrix’s unique advantage in the downtime insurance market stems from its data and AI capabilities.

Over the past 18 months, Parametrix has built an external, real-time monitoring solution that monitors every SaaS, PaaS, and IaaS system’s performance across the globe. Parametrix knows precisely when and where IT systems go down, and which companies will be impacted as a direct result.

This approach, monitoring every IT service provider rather than monitoring specifically targeted customer resources, allows clients to benefit from tailored and personalized insurance policies that automatically pay out claims when downtime occurs. This is a new type of data that others do not have access to and that did not exist several years ago.

How it Works

Parametrix is, as its name suggests, a parametric insurance system. Unlike traditional insurance, parametric insurance does not indemnify pure loss but instead issues a specific payment on the occurrence of an objective triggering event. Today, parametric insurance is utilized primarily for weather-related or other natural catastrophes, but Parametrix understood that this model of insurance is equally fitting for objective events like IT downtime — an occurrence that is impossible to influence and one that can cause significant financial damage to a business.

During onboarding with Parametrix, customers choose their coverage amount by calculating the expected cost of downtime for their business and agreeing on terms like limits and waiting periods.

Parametric’s monitoring systems then constantly monitor the performance of all the customer’s services and can detect failures and downtime to the millisecond thanks to their robust monitoring system.

If the specific downtime event occurs, the payment is determined by the coverage that the customer chose ahead of time and the event’s duration. In contrast to traditional insurance, your payout is immediate and has zero dependence on the insurer’s assessment of loss, providing business continuity, and eliminating the costly claim process.

A Team with Problem Solving in their DNA

The most successful startups are those whose lightbulb ideas come from their own hands-on experience. The Parametrix team is comprised of tech entrepreneurs who continuously faced downtime and the frustrations that came with it, coupled with some of the most experienced insurance actuaries in the market.

The team has grown and developed into a diverse and professional unit with Tamir Carmel as chairman and co-founder. This is Tamir’s latest venture after bootstrapping 10bis, an online and mobile food ordering service, from $0 to an exit of $156M.

Leading Parametrix is CEO Yonatan Hatzor, who has experience in the startup world as the former CTO and co-founder of the Matter, a 3D visualization startup. Alongside Yonatan is CTO Neta Rozy and COO Ori-Cohen, who have unique expertise in the tech and financial sphere.

With additional team members including actuarial scientists and insurance professionals, they have the drive, qualifications, and cohesiveness to grow into a powerhouse company.

Endless Growth Potential

Parametrix is already working globally with top insurance companies whose customers are beginning to understand the relief that the product brings.

“Since everything is cloud-based and we’re all so reliant on it, it’s peace of mind for a small price,” explains one of their earliest customers. The team has also secured multiple re-insurers from the Lloyds market, assuring the product’s viability for global customers.

We believe Parametrix will follow the path of other great Israeli “unicorns”, which have all grown rapidly, becoming multi-billion-dollar companies.

F2 sees Parametrix leveraging its first-mover advantage to acquire hundreds of thousands of customers from a diversified customer base across verticals with healthy gross margins. The market of downtime insurance, which is now in its infancy, is bound to experience rapid growth, and we are excited to support this remarkable team on their journey.